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De Grey building bigger picture in Pilbara

De Grey Mining (ASX: DEG) is embarking on a formative year, aiming to grow the resource at the Pilbara gold project in Western Australia to 2 million ounces and acquire full ownership of the western half of the project.
De Grey building bigger picture in Pilbara De Grey building bigger picture in Pilbara De Grey building bigger picture in Pilbara De Grey building bigger picture in Pilbara De Grey building bigger picture in Pilbara

De Grey plans to add further rigs to the current drilling programme at the Pilbara gold project

Staff reporter

Technical director and operations manager Andy Beckwith told an investor event in Perth yesterday the company's corporate goal was 3Moz, having increased the resource to 1.4Moz in October.

The project spans a series of deposits in the 1,500sq.km tenement package, with De Grey now planning a central 2 million tonne per annum, rather than a 1Mtpa, plant as the basis for a development study underway.

Clarifying its reasons to the ASX last week, De Grey said the expanded scale was due to the recent resource increase, exploration results and further potential - including underground - along with positive metallurgical results.

Beckwith described the metallurgical results from earlier this month as a "breakthrough", saying they increased gold recoveries to 90%-94% and simplified the process plant flowsheet.

The oxide deposit samples showed an average gold recovery of 94%, while tests on samples from Withnell, the largest sulphide deposit on the project, showed an average gold recovery of 90% by starting with a coarser grind size than previously proposed.

"Our vision is pretty simple - we're going to build a gold mine here and it's just when we kick off development," he said.

"We want to be a plus-100,000oz producer with a seven-year minelife, that's our corporate target."

The only "noose around our neck" is the need to pay A$9.7 million (US$7.4 million) in cash and issue $3 million worth of shares to China-backed Indee Gold Pty Ltd by July 24, to acquire full ownership of the western half of the Pilbara gold project.

The deadline had been extended in December at a cost of $700,000 (US$532,000).

Beckwith said he was confident of the transaction being completed, given the support indicated by De Grey's two major shareholders, Kirkland Lake Gold (TSX: KL) and the Ed Eshuys-led DGO Gold (ASX: DGO), which have both invested $5 million in the explorer.

It is understood the company will raise finance in the coming months and is setting off on an international investor roadshow later this week.

Meanwhile, Beckwith said the company planned to add further rigs to the two already operating at the Pilbara gold project as part of the resource extension programme.

The pair is targeting underground potential and shallower targets at the existing Withnell pits, and will then move on to Toweranna, where Beckwith sees strong potential to add further ounces.

Another option the company will investigate is ore-sorting at Toweranna, to reduce the volume being trucked back to the central plant.

Aside from the oxide and sulphide deposits, the project also hosts a number of conglomerate targets.

De Grey also yesterday announced "encouraging reconnaissance drilling results" including 5m at 0.53g/t from surface at its Farno McMahon joint venture, 20km south of Withnell.

De Grey is earning into Farno, which is owned by Pilbara conglomerate-frontrunner Novo Resources (TSXV: NVO).

"The story that there's no gold in the Pilbara is completely wrong," Beckwith said of the region more renowned for its iron ore and hard rock lithium projects.

"We want to be a producer and we reckon we've got one of a handful of the next development projects, in the best state."

De Grey shares are trading near a 52-week low at A10.5c in Australian trade this morning, capitalising it at $44.4 million.